Star’s view: Tories need a lot to go right,

Call it the casino budget. Prime Minister Stephen Harper’s government is doubling down on another pinch of austerity, gambling that it can cut costs, hammer down the deficit and balance the books in the next couple of years without inflicting more damage on an economy that has been faltering and may be drifting into trouble.

If things go their way the Conservatives will get bragging rights going into the 2015 election, and will be able to deliver on $3 billion worth of middle-class tax breaks that Harper promised once the deficit is erased. If not, Canadians collectively will suffer and so may the government’s political fortunes. In either case, the country’s1.3 million jobless can’t expect much relief any time soon. And the Tories remain obtusely unconcerned about the socially corrosive, growing gap between the affluent few and the many who struggle to make ends meet.

Finance Minister Jim Flaherty may call it a budget to “bolster confidence and growth,” but that’s more a hope than a certainty. Flaherty himself admits the recovery is “fragile,” that the flat economy has cost Ottawa $2 billion in revenue losses and that it needs nurturing. Given that analysis he could have opted to leverage Ottawa’s $282-billion spending power more ambitiously to encourage growth. Our price-chopper corporate tax rate alone (less than half the American rate, loopholes aside) costs Ottawa some $14 billion in foregone revenue, money that could be used to balance the books and generate more growth.

Instead, Flaherty has chosen to use the Tories’ second majority government budget to trim the $25.9 billion deficit by another $7 billion next year and to eliminate it by 2015, partly through more federal service cuts and job losses. He deserves credit for consistency. But as the Europeans know from painful experience, you can’t chisel and chip your way to prosperity. Since Flaherty began paring back spending, growth has fallen from 2.6 per cent last year to 1.8 per cent this year and is expected to fall again to 1.6 per cent next year. Yet here we go again.

There were other options. The progressive Canadian Centre for Policy Alternatives urged the Conservatives to boost demand in our $1.8-trillion economy by investing more heavily in infrastructure, poverty reduction and child care, among other things, to spur growth and create jobs. Arguing, correctly, that “Canada has a growth problem, not a deficit problem,” the centre advanced a $40-billion-plus program with an eye to creating 300,000 jobs. It would have hiked taxes on the wealthiest, increased corporate taxes and let the deficit rise this year on a one-time basis. But the Conservatives rejected this approach, sight unseen. Rather, Flaherty’s budget makes a dubious virtue of doing as little as possible, much as last year’s budget did. And as BMO chief economist Doug Porter put it, “a lot has to go right over the next three years” in terms of expected growth, federal revenues and restraint.

Apart from throwing annoyed Canadian shoppers a sop by cutting the tariffs on sports equipment and baby clothes, the most innovative feature of the budget is the Canada Job Grant, in which Ottawa pledges to provide $5,000 per person for shortterm job skills training to fill some of the 260,000 jobs the government says are going begging, provided that provinces and employers each pony up the equivalent amounts. But that would be funded by part of the $500 million that Ottawa already transfers to the provinces for job training, and they would have to agree. Moreover, it won’t kick in until next year.

The budget also wisely renews the Building Canada fund and other initiatives that will provide some $5 billion a year to cities and towns to finance transit, bridges and other key infrastructure. That will be welcomed by the Federation of Canadian Municipalities, which has urged spending on that order. But it’s a continuation of existing spending.

Other measures are equally modest, leading New Democrat Leader Tom Mulcair to accuse the Tories of playing a “shell game” by moving around money without solving problems.

There’s $1.4 billion in tax relief for manufacturers over two years to help them invest in new machinery and equipment. And there’s more than $1 billion for Ontario manufacturers.

The government hopes to raise nearly $2 billion more in taxes and tariffs by 2015, partly by closing tax loopholes and chasing down cheats, to offset some of these initiatives. And it is paring $4 billion this year from the cost of running the civil service.

Bottom line? This hyper-cautious, narrow-focus budget keeps the Harper government on track to balancing the books again, as promised. But it does little to address the key problem of slowing growth, and offers scant short-term hope for the jobless. The Conservatives have crossed their fingers, and doubled down.

Ottawa’s budget does little to address the key problems of slowing growth and joblessness